The majority of investors in the first-ever social impact bond launched by the UK government were foundations and charities, according to an early report into the success of the payment-by-results pilot.
The social impact bond (SIB) model attracts funding from private investors to pay for interventions to improve outcomes on a payment-by-results basis.
HMP Peterborough, as host of the first of six planned SIB contracts aimed at reducing re-offending announced in December’s Green Paper, Breaking the Cycle, attracted funding from more than ten charitable trusts including the Esmée Fairbairn Foundation and the Barrow Cadbury Trust.
The Ministry of Justice (MoJ) report, Lessons learnt from the planning and early implementation of the Social Impact Bond at HMP Peterborough, conducted interviews with 22 key stakeholders and found that the SIB attracted new sources of funding, in part because of an opportunity for mission-aligned investment. Investors were “keen to fund innovation, that this investment was aligned with their charitable missions to do public good, and that the SIB investment allowed some investors to improve outcomes in an issue area of particular interest to them”, according to the report.
But the MoJ found that charities are restricted by tax rules preventing their ability to invest from their endowment rather than by giving a grant and called for the government to consider offering tax incentives to encourage investment. A “lack of clarification of trustees’ duty to maximise financial return”, also provided a barrier, the report found.
The SIB system was devised as a way to “lighten the burden on the taxpayer,” the MoJ advised, by transferring the financial risks from the government to the investors. The early report indicates that these risks have been “successfully transferred” but admits that the contracts remain “untested in many respects”.
Named investors in the HMP Peterborough pilot are: Barrow Cadbury Trust, the Esmée Fairbairn Foundation, Friends Provident Foundation, the Henry Smith Charity, Johansson Family Foundation, Lankelly Chase Foundation, the Monument Trust, Panahpur, Paul Hamlyn Foundation and the Tudor Trust.
